Patrician and aloof, Malcolm Turnbull is grappling with an energy debacle, that took root in South Australia (aka ‘Australia’s wind power capital’) and, as a result of the Federal Large-Scale RET, threatens to burst the borders and destroy the entire Eastern Grid. Incidentally, geographically the single largest interconnected electricity grid on the planet.

STT hears from its Canberra sources, that Turnbull is terrified of the political ground to be lost if South Australia’s power pricing and supply calamity goes national.

In a move that can only add to what the wind industry sees as intolerable uncertainty, Malcolm Turnbull has recently started singing the praises of the latest, state-of-the-art coal-fired power plants.

Australia should be a world leader in demonstrating that carbon emissions can be lowered by replacing ageing electricity generators with new and emerging technologies to produce cleaner coal, Malcolm Turnbull has declared.

The Prime Minister also hit back at Tony Abbott days after he called on Mr Turnbull to dump the renewable energy target, saying renewables had a “role” to play in reaching the government’s carbon reduction target of up to 28 per cent by 2030.

As revealed in The Australian yesterday, research commissioned by the Turnbull government has estimated the country’s emissions would be cut by up to 27 per cent if coal-based power generation ran on “ultra-super-critical-technology” used in other parts of the world.

Carried out by the Department of Industry, Innovation and Science, the research showed emissions would be reduced even further — by up to 34 per cent — if the technology now in development was adopted across Australia.

Mr Turnbull acknowledged coal would be part of the world’s energy mix “for a very, very long time” as he attacked the Labor state of South Australia, which generates 40 per cent of its energy through wind, for having the “most expensive and the least reliable electricity” in the country.

“We are the biggest coal exporter in the world. If anybody, if any country has a vested interest in demonstrating that clean coal and cleaner coal with new technologies can make a big contribution to our energy mix and at the same time reduce our emissions in net terms — it’s us,” Mr Turnbull said.

“Our approach, and my approach, to energy is absolutely pragmatic and practical … Renewables have a role. Fossil fuels have a role. Every type of energy — storage, all of it — has an important role to play.”

Mr Turnbull said it was “wrong” to be ideological about the nation’s energy mix after Mr Abbott wrote in The Weekend Australian that the government should urgently scrap the mandatory RET, insisting the focus should be on what is most affordable.

The Minerals Council of Australia said the Department of Industry’s projections showing new coal generation technologies could reduce emissions “sharply” were consistent with emissions savings being achieved around the world.

“These HELE plants deliver secure, affordable energy while lowering CO2 emissions by as much as 50 per cent compared with existing plants. As the adoption of carbon capture and storage technologies increases, these emissions savings will increase to 90 per cent.”

Resources Minister Matt Canavan said Asian countries were not only reducing carbon emissions by installing supercritical coal-fired power but they were doing so “at a cost cheaper than many other emissions reducing options”.

“When reducing the carbon emissions of our power stations we should seek to do so at the lowest cost,” he told The Australian.

Replacing sub-critical technology with super-critical technology saves CO2 at a cost of between US$15 to US$25 a tonne in Southeast Asia, according to the World Coal Association.The Australian

While Malcolm Turnbull may truly believe in the benefits of switching to high-efficiency, super-critical coal-fired plant, getting there is, in policy terms, much easier said than done.

In the absence of an emission trading scheme – which would potentially reward the owners of more efficient coal-fired power plants for a relative reduction in CO2 emissions (see our post here) – current energy policy leaves no room for any base-load power plant in a power market grossly distorted by the Large-Scale RET.

Ageing coal-fired plant – like Victoria’s Hazelwood power station (destined to close soon) and South Australia’s Port Augusta, Northern power station (which closed last May) – with high maintenance costs have no hope of remaining profitable, as long as the LRET remains.

Indeed, no base-load plant can operate profitably, as designed. Steam powered turbines (whether their boilers are heated by coal or gas) are designed to run constantly, practically 24 x 365, with scheduled downtime for maintenance and inspection of boilers, pipes etc every few months or so. Once the boiler is heated to critical temperature (generating the level of steam pressure required to run its turbine), the unit is meant to remain at that temperature and pressure throughout its operating cycle; or at least close to it – repeated heating and cooling causes metal fatigue, degrading the integrity of the fire-box and boiler, thereby reducing the life-span of the plant.

With power demand varying on a day-to-day basis, the fuel fed to boilers will likewise vary, but is not cut completely – water is kept close to boiling, even when a plant is not dispatching power: what’s known as ‘thermal reserve’. However, because fuel costs money, the owner of the plant can only cover that cost whenever power is being dispatched to the grid and revenue from power sales returned. Moreover, any hope of making a profit requires the revenue obtained from dispatching power to exceed the cost of doing so.

For students of that dismal science, economics, the power market was often used as a teaching example: the concept of a “natural monopoly” was defined by reference to the generation and delivery of electricity to homes and businesses.

Australia’s Federal Large-Scale RET has turned the economics of Australia’s power market on its head. And it’s the erratic nature of wind power that is principally responsible for the havoc caused. The first image is of the output from AGL’s Torrens Island Gas-Steam plant during July 2016, the second is of the combined output of SA’s 18 wind farms (notional capacity of 1,576MW) during the same period:

In South Australia, when the wind blows, for periods of four or five hours at a stretch, base-load operators get knocked out of the market, as wind power outfits dispatch power to the grid at prices close to or below zero (see above). That is, wind power operators literally offer to give their power away to the grid manager (or even pay to do so) simply because they are guaranteed fixed prices set by Power Purchase Agreements (in South Australia, AGL in its capacity as retailer pays $112 per MWh for wind power, irrespective of the price at which it is dispatched to the grid).

The high, fixed and guaranteed prices under PPAs are only possible because of the value placed on the Renewable Energy Certificate which is collected by wind power outfits for every MWh that they dispatch to the grid. RECs are currently trading at around $89 on the spot market:

The price distortion caused by the LRET was picked up by the Australian Financial Review’s Mark Lawson about how SA’s wind power outfits use the REC subsidy to their advantage and the disadvantage of every other generator:

When the wind is blowing strongly wind farm power will flood the market to pull prices down to minus $20 (generators pay retailers to take the power). This is obviously uneconomic for conventional generators, but wind and solar generators can still make some money under the renewable energy target.

A wind power outfit will still turn a profit even if it collects nothing from the grid manager or it pays the grid manager the $20 per MWh mentioned in the quote from the AFR above. That $20 is simply deducted from the fixed price obtained under the wind power outfit’s PPA with a retailer, giving a net return that leaves the wind power outfit in the black – in AGL’s case: $112 – $20 = $92 per MWh. Our favourite whipping boys, Infigen report wind farm operation and maintenance costs of $25 per MWh, so revenue above that leaves room for a profit margin, based on the value of the REC.

So, for whatever period the wind is blowing, conventional base-load power plant get knocked out of the market, unable to match the prices offered to wind power due to the REC subsidies it attracts. Meanwhile, they will continue to burn fuel, pay wages and all of their other overheads and operating costs without collecting a penny.

All of the above means that, for Malcolm Turnbull’s plan to include super-critical coal-fired power plant in Australia’s energy generation fleet, there has to be a wholesale rewriting of the legislation that sets up the LRET.

STT’s Canberra sources tell us that the most likely move involves forcing wind power generators to operate just like every other generation source on the grid.

The solution being formulated in Canberra is to reclassify wind power generators as “scheduled generators”, thereby forcing them to deliver nominated volumes of electricity at nominated times, over nominated periods, predetermined in advance.

A generating system with intermittent output (such as a wind or solar farm), and an aggregate nameplate capacity of 30 MW or more is usually classified as a semi-scheduled unless AEMO approves its classification as a scheduled or non-scheduled generating unit. AEMO can limit a semi-scheduled generator’s output in response to network constraints, but at other times the generator can supply up to its maximum registered capacity.

Scheduled generators, on the other hand, face serious financial penalties should they ever fail to deliver the volumes promised at the scheduled time and for the scheduled period.

The definition of ‘semi-scheduled’ was cooked up by the wind industry to avoid being penalised for failing to deliver.

Able to flood the market when the wind blows (while still collecting guaranteed prices under their Power Purchase Agreements at rates in the order of $110 per MWh), wind power outfits have, so far, avoided the costs to power consumers caused by their inability to deliver at all.

One way of providing a level playing field for conventional generators under serious consideration is to reclassify wind power generators as “scheduled generators”. That way, wind power outfits would, like meaningful conventional generators, be required to nominate, in advance, a volume of power to be delivered at set times and for a set duration.

In the event that the wind power outfit did not deliver the volume promised at the designated time or for the designated duration, the wind power outfit would become liable for the cost incurred by the grid manager in obtaining an alternative supply of power. And, with South Australian spot prices often hitting the regulated market cap of $14,000 per MW/h when the wind stops blowing, the cost that would ultimately be borne by wind power outfits for failing to deliver as scheduled would be colossal.

The flipside of the equation is that wind power outfits would not be entitled to dispatch any power to the grid if they had not been scheduled to do so in advance. On that basis, wind power outfits would only be able to deliver power on those occasions when demand exceeded scheduled supply and to only deliver volumes of power based on the difference between actual demand and scheduled supply.

By re-designating wind power generators as “scheduled generators”, conventional generators would know, in advance, when to fire up their plant, based on the preordained schedule set by wind power generators themselves. On that basis, conventional generators would only ever be burning fuel (in reality, at rates sufficient to generate the heat and pressure required to generate steam) when they were in a position to dispatch power to the grid and earn revenue from doing so.

For Malcolm Turnbull’s plan to add super-critical coal-fired plant to Australia’s generating capacity to have any prospect of success, he will need to think and act fast: conventional generators have no hope of surviving under the LRET as it’s currently configured.

In reality, if he wants to see an upgrade in conventional power plant Malcolm needs to follow Tony Abbott’s advice – simply stop the clock on the LRET and put an end to any further expansion of market distorting, grid-wrecking subsidised wind power. Malcolm, your time starts now.

Comments

Designating wind generators as scheduled suppliers won’t solve the problem only exasperate it. Who will have the spinning reserve to fill the void when the wind generators have been scheduled to supply say 1000Mw and have only 100Mw coming from their wind generation. It might all seem easy on paper but this is the problem that is always overlooked. When all the generation came from coal fired generators the scheduling was done six months to a year ahead and every one knew what was happening on a daily basis now the scheduling is probably done on an hour to hour or even minute to minute basis. Now how on earth could anyone run an electricity system like that. The Germans have even found it beyond their capabilities and are building more coal fired power stations but here in Ostralia where there is virtually no planning at all the electricity system has been left to it’s own devices to work. All so very Ostralian if South Australia wants to have renewable energy then it should be removed from all the interconnectors and left to it’s own devices to produce the power it needs and show the rest of the world how it’s done and what the final cost is.

Dear Mr Waffle, the point of scheduling a generator is that that generator is liable to deliver the volume of power scheduled, at the specified time and for the specified duration. If they fail to deliver that generator must make up the shortfall, by going into the market and purchasing the difference. A wind generator would need to have a hedge against that, which might be a ‘capacity contract’ with a base-load plant to have it hold spinning reserve. The wind generator would be liable for that cost as part of its input/operating expense. A similar system is operating in Europe. However, what is being proposed here is that wind generators will be forced to suffer the risk of adverse weather events, rather than conventional generators, as occurs now. If wind was treated under the NEM rules as scheduled, then SA would not have suffered the run of blackouts and load shedding that it has. If you have a better solution, we’re all ears?

I totally agree but in the real world there is only one solution and that is to return to the pre keating privatise everything days and put all the generation and distribution back into government hands and make them responsible. Having a dual system to support each other still leaves you with all the coal fired power stations running just in case the wind stops blowing. The elephant in the corner is the age of the coal fired power plants and the inability of private companies even in a climate of positive acceptance of coal fired power ever being able to get the funding to build one. This was why the state governments took over the generation system in the first place when the power stations cost rose above the ability of all the small generators around Australia to get the loans needed to build new 1000MW stations the government had to go gaurantor which wasn’t possible so they enacted legislation to take the electricity systems over and put them under government control. To my knowledge no large power station has been built in Australia by a private company since.

I started a PETITION “SA PREMIER JAY WEATHERILL : Demand the RESIGNATION of the Energy Minister for HIGH POWER PRICES CAUSING SA’s JOBS CRISIS and 15,000 household POWER DISCONNECTIONS, frequent POWER BLACKOUTS and the JULY 2016 POWER CRISIS” and wanted to see if you could help by adding your name.

The article provides a reasoned argument in support of Turnbull’s superficial epiphany. I wonder if he has taken time to extend his mind to the coming submarine project and choice of manufacturing venue. China has stolen our steelmaking capability. They do not produce grades of steel suitable for submarine hulls. SA/BHP used to.

There is a huge electric welding component in hull manufacture. SA does not produce sufficient electricity for the task. Unless welding is scheduled for times when wind power is useable. I don’t think Electricity Bill and his union mates have thought around this either. Perhaps Bill hopes to get electricity from his China mates?

Terrific article – the presentation of the market priority access provided by the “semi-scheduled” designation for wind farms is sorely needed since it, as much as the much more widely discussed LRET & RECs, allows the wind farms to operate in such an economically damaging manner.

Both LRET & RECs and market priority access are needed for them to stay in business and removal of either would make them financially unviable. I contend that the LRET is a more politically difficult proposition to remove while removing market priority access by getting rid of the “semi-scheduled” designation would barely raise a ripple since few appreciate just how much it shields wind farms from their inadequacy.

Thanks Analitik. We noted your recent comment that: ‘You need to mention how priority access to the market works in conjunction with the PPAs and RECs to produce this economic fiasco. The renewables need both in order to make money but few understand how priority access to the market is just as damaging and distorting as the subsidized payments.’

And saw the article concerning the proposal to build HELE coal-fired plant as the perfect opportunity to deal with that issue.

We agree that the scheduling of wind power generators is a quick fix with little political downside. Hence it is being floated in the Coalition camp as a serious option. Expect to hear more from the Libs on it soon – probably from the back bench, though.

Could STT please explain how wind power is usable provided there is sufficient load-following from conventional generators.

If the generator is connected then surely all involved are simply pretending the windmill works

I must have missed something
It might be just me
There could be a gap in my knowledge
My understanding is that wind turbines simply do not work under any circumstance
That they do not produce 230 volt 50 Hz power
Their useless harmonics are every HZ but 50

Could STT please explain

There are about 16,000 wind turbines lying idle with many in California. They will never restart. They will never be dismantled. They will slowly rust away.

We have. We posted a link in a response to you. In the post above the data shows a gas-steam plant cutting it’s dispatch as wind power output increases and vice versa. Proving that wind power is useable.

Yes. Intermittent generators require an equal amount of conventional generation that can ramp up and down at the same rate (plus the rate of demand change) as the intermittent generation comes in and out as conditions vary. At best, this reduces fuel consumption for the thermal generators but often, the savings are minimal due to the ramping causing loss of operating efficiency.

Factoring in the capital cost of the intermittent generators in addition to the conventional generators that must still be available, renewables really cannot be justified except in extreme cases where fuel costs are exorbitant.

We are subsidizing Wind towers and solar from China who must be laughing. Read somewhere after 10 years they must be replaced. What a scam. If these products were any good and made at minimum cost as they would be in China it appears the Australian government and people are being scammed.
Funny how Turnbull attacks Abbott and a week later does exactly as Tony Abbott said. Most of the bills that have passed and Turnbull puts down to his government were initiated by Abbott.

It shows what type of man Turnbull is. At the end of the day unfortunately if Labor gets in at the next election they will do their best to destroy the coal industry so their self serving wind turbines can be bought boosting the profits of the Industry super funds that they basically run.

Labor will not care about the costs to the Australian people for power. A cost that in the end will cost us huge power blackouts and will put us back in time.

We will become another Philippines where brownouts and power rationing are a daily event. We will be bordering a 3rd world country with massive debt and manufacturing industries unable to compete etc. The question is how long will it take and how much will it cost to build these new technological power stations and how much will it cost?

We must maintain and run our older power stations while they are upgraded or new ones built. We are in debt for Billions of dollars, yet these issues will give us no hope of paying off that debt.

WHAT A MESS. Dysfunctional government playing to the minority to get a vote which in turn is taking us back to the stone age. The lucky country? I dont think so.

Here we go again. Early in the article STT says SA generates 40% of its electricity from wind

Windmills produce dirty useless harmonics. They produce no useable electricity. They are a con and a scam

They are so useless and out of whack they produce dangerously high earth voltages

The wind industry itself knows a grid should not go above 15% by wind. Above 15% and power generation cannot satisfactorily make the necessary adjustments quick enough to meet changes in electricity demand. Speaking of course as though windmills actually produce electricity.

This whole concept of running a state on renewables and that renewable being wind is a monstrous deception

I do not know whether Weatherill is caught up in the deception or just caught up in something he has no understanding of

If Weatherill had not bought into the global warming climate change humans are destroying the planet nonsense we would have no windmills today and no problems

Or to put it another way. If there was no Weatherill there would be no problem